When people think of first time home buyers, you think of anxious, confused and indecisive individuals. However, a new report is stating it is the exact opposite. There were two surveys done by BMO and Genworth. This study finds that first time home buyers are expecting to spend $300,000 when the current average of home prices start at $368,895. This is a difference of 19% of what they think they will spend versus what is likely the will spend. In regards to down payment of the home, first time home buyers are averagely showing of putting down 16% percent of the purchase price (works out to be $48,000).
Renters were also surveyed by CAAMP (Canadian Associated of Accredited Mortgage Professionals) and found that the average down payment they had saved for a property was $21,000. Only 11% had $30,000 or more saved for a purchase in 2012. 41% of all home buyers put down less than 10% of their purchase price from 2010 to 2012. This is a shock, given the fact that some of these individuals are not first time home buyers and should knows the ropes by at least their second purchase.
Further to this, BMO indicated that approximately 27% of first time home buyers were expected to receive assistance from a third party for the down payment such as family members like mom and dad. Regardless of all of this, we are seeing young buyers are saving heftier down payments. 56% of recent first time home buyers put down over 20% of the purchase price on their homes, compared to last year that figure was only at 36%. The amount of individuals saving five years or more for a down payment rose by half – 50%, which may be due to the rising costs in the housing market and stricter approval guidelines reports Genworth.
59% of first time home buyers waited to buy their first homes due to rising home prices. 19% of first time purchases have been delayed due to stricter approval guidelines (B20 rules introduced last summer indicating a maximum of a 25 year amortization on high ratio mortgages[less than 20% down]).
Some quick stats from BMO to conclude: the typical age of a first time home buyer is 29 years old and expect to be mortgage free by the time they reach age 49. This compared to current stats is not the same based on peoples current debt loads. First time home buyers are also more likely to take a fixed rate over a variable rate (46% to 20%), this indicates they do not like to take risks when it comes to the market and potential rising interest rates. The province that is the highest for home purchases would be Albert with an average $406,000, British Columbia at $384,00 and finally Ontario at $326,000.
Given all of these things to consider, especially for first time home buyers, it is crucial that you go with a mortgage broker for your mortgage!